The mechanism known as “joint implementation,” defined in Article 6 of the Kyoto Protocol, allows
a country with an emission reduction or limitation commitment under the Kyoto Protocol (Annex B Party) to
earn emission reduction units (ERUs) from an emission-reduction or emission removal project in another Annex
B Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target.

Joint implementation offers Parties a flexible and cost-efficient means of fulfilling a part of their Kyoto
commitments, while the host Party benefits from foreign investment and technology transfer.

Eligibility and approval

A JI project must provide a reduction in emissions by sources, or an enhancement of removals by sinks, that
is additional to what would otherwise have occurred. Projects must have approval of the host Party and
participants have to be authorized to participate by a Party involved in the project.

Projects starting as from the year 2000 may be eligible as JI projects if they meet the relevant
requirements, but ERUs may only be issued for a crediting period starting after the beginning of 2008.

Track 1 and Track 2 procedures

If a host Party meets all of the eligibility
requirements to transfer and/or acquire ERUs, it may verify emission reductions or enhancements of
removals from a JI project as being additional to any that would otherwise occur. Upon such verification, the
host Party may issue the appropriate quantity of ERUs. This procedure is commonly referred to as the
“Track 1” procedure.”

If a host Party does not meet all, but only a limited set of eligibility requirements, verification of
emission reductions or enhancements of removals as being additional has to be done through the verification
procedure under the Joint Implementation Supervisory
Committee (JISC). Under this so-called “Track 2” procedure, an independent entity accredited
by the JISC has to determine whether the relevant requirements have been met before the host Party can issue
and transfer ERUs.

A host Party which meets all the eligibility requirements may at any time choose to use the verification
procedure under the JISC (Track 2 procedure).